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HW5 - An Nguyen.docx - HW5 Group member 1: Thu Duong Group...

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HW5Group member 1: Thu DuongGroup member 2: An NguyenGroup member 3: Thanh TranChapter 16: Problem 16-2Day sales outstanding =ReceivablesSales/365=2,000,00010,000,000/365= 73 daysIf all customers paid on time, the day sales outstanding will be 30 days.Day sales outstanding =ReceivablesSales/36530=Receivables10,000,000/365=> Receivables = 30 x (10,000,000/365) =821,917.81Capital would be released = 2,000,000 – 821,917.81 = $1,178,082.2Problem 16-3Net daily purchases = 8,000,000 / 365 = 21,917.81-Payables level, if the firm takes discounts:Payables = 21,917.81 x 5 = 109,589.05-Payables level, if the firm takes no discounts:Payables = 21,917.81 x 60 = 1,315,068.6-Credit breakdown:Total trade credit$1,315,068.6Free trade credit-109,589.05Costly trade credit$1,205,479.55
rNOM=Discount100Discountx365Dayscredit outstandingDiscount period=31003x365605=397x36555= 0.031 x 6.636 = 0.206 = 20.6%EAR = (1 + Periodic rate)N– 1= (1 + 0.03/0.97)365/55– 1 = 1.225 – 1 = 0.225 = 22.5%-Bank loans: 10% interest paid monthlyEAR = (1 + 0.1/12)12– 1 = 1.1047 -1 = 0.1047 = 10.47%Lamar should use bank debt because the EAR of bank loan is less than the EAR of additional
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Term
Spring
Professor
IntermediateFinancialManagement
Tags
Revenue, Debt, Generally Accepted Accounting Principles, trade credit, Thanh Tran, Thu Duong

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